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Russia Seen Floating Long-Term Oil Discounts Amid Price-Cap Push: #Bloomberg

19:48, Thursday, 25 August, 2022
Russia Seen Floating Long-Term Oil Discounts Amid Price-Cap Push: #Bloomberg

Russia has approached several Asian countries to discuss possible long-term oil contracts at steep discounts as US officials continue to push a plan that would cap the price of the country’s oil, according to a Western official.

The tentative conversations to offer some Asian buyers discounts of up to 30% may be a sign that Russia is trying to head off discussions by Group of Seven nations about carving out an exception for pending European Union sanctions on Russian oil, said the official, who asked for anonymity to discuss sensitive talks. That plan would allow third parties to more easily purchase Russian crude oil at a low price set by Western nations.

Russia also may be trying to lock in replacement buyers for the oil it’s currently selling to Europe.

Indonesia’s minister of tourism, Sandiaga Uno, said in remarks he posted on Instagram over the weekend that Russia has offered to sell it oil “at a price that’s 30% lower than international market price.” He added that President Joko Widodo was considering the offer, “but there was disagreement. There are fears that we will be hit by US embargoes.”

The EU’s sixth round of sanctions over the invasion of Ukraine includes a ban on Russian oil, as well as the use by third countries of the bloc’s companies for insurance and financial services. That ban takes effect on Dec. 5, but US officials are worried that the current framework would drive up oil prices substantially and deliver windfall profits to Russia.

Some European countries have backed the idea of carving out an exception to the insurance ban for oil sold under an internationally set price cap, but others have said such a system would only work if significant Asian purchasers of Russian oil, particularly India, agree to participate.

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